Packer16

As we progress through this credit cycle, I think you will find many re-fi hidden bombs around. Packer

In addition to the debt levels you need to look who are the debtors and do they have the resources to pay. Today we are in a much better place than 2007. In 2007, you had groups of uncreditworthy folks who were the debtors on all kinds of debt. Today, the debtors are for the most part creditworthy entities. The debt hose has been shut down to the uncreditworthy folks since 2008. If you look at credit cards, the originated receivables are of much higher quality than 3 years ago. The write-off rate has declined from 10% to 3%. The regulators are keeping a tight reign on bank/credit card lending. We are starting to see some alternative forms of credit (like Lending Club and Prosper) but these are still very small. Over time if these entities continue to grow it will be a problem. I think we have the potential for a bubble but some elements are missing, namely, large amounts of credit to uncreditworthy folks and large inflows into an asset class. Just my 2 cents. Packer

Overall Results - +146.3% I run a concentrated portfolio of value names. This is my best year and I don't see it happening again. Highlights TVs (funded in part by sale of SALM and MGAM) LIN +520% GTN +167% NXST +128% ALSK +106% (sale after jump up earlier this year) ATSG +109% AIQ +292% BAC/BAC-WT +96% (thanks to ERICOPOLY kept common sold WTs) COF-WT +56% LNC-WT +173% (should have invested more) KW-WT +128% GM-WT +81%/+218% (from 7/2012) Lowlights EXC calls -100% SD -30% (sold to buy a cheaper oil co.) OIBR -5% I happened to be fortunate to be in some hot areas in 2013. Thanks to the folks on this board I had enough insight to purchase some of the financials and worked through the value destroying analysis of the PT/OIBR merger. Packer

BG2008 - can you provide some more details on your strategy/best and worst of 2013 and holdings? Are you concentrated in less than 10 positions, etc. MVP444300 - do your returns include cash or not and can you provide some more details on your strategy/best and worst of 2013 and holdings? Are you concentrated in less than 10 positions, etc. Did you suffer much of a decline in 2008? Great returns BTW. Packer

In terms of upside it is Intralot. Nice recurring revenue selling a fat discount to peers and not much difference in terms of where the revenue is coming from just that it is located in Greece. When I hear a poster say that Greece is begging for investment and the distressed debt guys are wanting to get in and Fairfax/HWIC is investing, my value antenna go up. Packer

I have a situation where a rights offering is taking place at a price below the current trading price (including rights). What has been your experience after the rights have been issued? Has the price approached the rights offering price? TIA. Packer

It is getting more expensive. I am having to go to Greece to find bargains. Packer

If you look at flow of funds from Bloomberg this trend began a few Qs ago and is accelerating into year end. Most of the flows YTD have been into international funds. In counterbalance pension funds (per H. Marks) have historic low allocation to stocks and the net inflows into stock funds have not erased the withdraws since 2008. Packer

In 2008, it looks like you had leveraged real estate and stocks. Now it appears some of the leverage is out of the system (at least the most unstable - private funds lent to uncreditwothy folks) replaced in part by gov't financing and the fed purchases. I like how you looked at the bond market and saw the credit risk was there then where able to translate it to stocks. Now it appears we are in the opposite situation with firms having alot of cash and low debt along with households deleveraging. I was looking at credit card write-off numbers and FICO scores in CC pools and both of these are improving very fast as banks don't appear to be lending to high risk individuals. This in combination of relatively low stock allocations in personal portfolios and a dis-inflationary environment would point to increased valuation despite average valuations. It appears the credit portion of the boom has not started as of yet so the potential decline in a downturn will be more in 20 to 30% variety versus the 50%+ variety was saw in 2008. I think Howard Marks has made this observation and is going forward with caution. My biggest mistake was to buy "cheap" financials going into the crisis without realizing the fundamentals had deteriorated so much. Both Berkshire and Fairfax saved my bacon so I could invest after the crash. Now I am requiring a pretty big margin of safety and have been selling stocks with lower price MoS and buying those with higher price MoS. Packer

Merry Christmas everyone and all the best for a prosperous 2014. Packer

Does anyone know of any sources for credit card pool loss, interest rate and recovery rates? Or peer-to-peer data? TIA. Packer

How much can and under what terms from a broker? You can borrow 50% of stock value and you can ask brokers for rates. I would use this as a base. This assumes you put up the stock for collateral. You may want to offer an equity participation in return for a lower interest rate. I think the rate will be dependent upon how much you leverage the stocks you are planning on buying. If you want an unsecured personal loan I think you are talking about credit card rates of 10% +. Packer

In talking to local asset managers I think the system they are in are designed to underperform. Namely, the securities have to be approved by a committee and ugly and unusual securities we look at here are not what most of these guys want to own. In addition, many want larger firms that can be sold if there are redemptions. It is a difficult situation where you have smart guys who could in theory load up on names we discuss here but do not because of institutional/customer constraints. What many should do is fire their customers and focus on what are the best investments but this will lead to many loosing their jobs. If VIC has a good number of folks of the institutional ilk (especially evaluating ideas for entry) then I could see how some the mindset could carry over. Alternatively, here we are unconstrained and can discuss the "untouchables" of the institutional investing community of which VIC may be a part of. BTW some of my best performers are when the "untouchables" become touchable like SALM, SGA, GTN, NXST and LIN. Packer

I like recurring revenue businesses like telecom, software, IT services, media (TV/radio) and leasing of all sorts. I also like to dabble in financials, autos, oil and gas and defense contractors. In the future I would like to become smarter in real estate (especially development assets). Packer

I had the same experience with two idea that I submitted. They were rejected then accepted by another poster at a higher price. After that I gave up. If there wasn't a great stock community like this I probably would have tried again. Access to the ideas provides a great resource to find thrown away value stocks that can work out great. That is how I found out about Petrobank in the mid 2000s. Packer

I think another part of Monish's appeal is that he has thought through and lived through changes in investment issues, like concentration, checklists and cloning. His observations to mind have been spot on and his performance after the crash has reflected that. The only other person I have seen do a better post mordum of mistakes is Tim McElvaine. Packer

We will see where I am at year-end as I have volatile stock like SHLD (AIQ) in the portfolio which could materially reduce the return by year-end. Now I am up about 136% so far this year my best year if it holds to the end of the year. I don't expect to be anywhere near this number next year. The TVs along with AIQ helped earlier in the year. Packer

I like the II but some of Zweig's commentary is off mark (given that he is an efficient market guy). For a starter, I would give him an edition without Zweig's commentary. Packer

One of the best asset allocation ideas I have seen is to have 3 years living expenses in ST bonds as a safety valve to use if markets decline if they go up take income from your stocks. This will keep the cash component to a realistic level compared to expenses and allow you to fully invest without fear of having to sell to pay for expenses. Christopher Browne of Tweedy Browne has done this historically with his clients. As an alternative you could buy puts of the same amount which can be exercised in a downturn. Packer

You are correct if you have long-term patient capital. I don't know if Monish's comments were in the context of a fund where he has to be concerned with redemptions. The other factor being fully invested is the volatility of a portfolio versus one with cash. If was in context of a fund, I think it makes sense if it is long-term patient capital not required for a long period of time then your approach is more appropriate. The opportunity cost is indeed high if say the long-term expected return on equities is 10% and you think with your approach you can beat that. Packer

I think a different way to think about net-nets is to include RE and other assets at appraised value. US GAAP does not require thin but IFRS does. So there are some interesting net-nets outside the US by this definition. This is an area Marty Whitman specializes in. Packer

This discussion reminds me of the classic light bulb commercial: http://www.youtube.com/watch?v=Ky8x0ykF_tQ Packer

Congrats on the new job. You may want to look at the Appendix to the II where Warren Buffet discusses his involvement with the Washington Post and FMC pension plans. Packer

Part of it may have to do with neglect. The smaller net nets are not covered by analysts and may not be of interest to even hedge funds. The larger the company the more suspect that I know something that someone else doesn't and that is not reflected in the stock price. Packer

I think the American Dream is misstated - who ever stated if you worked hard and persevered you get into the middle class? If you work hard and persevered in a field demanded by employers then the statement is true. If you go to school and take STEM subjects in demand then you will be fine. Just ask aspiring actors and journalists and other star professions how many hard working and persevering folks do not make it? I think the mobility is there if you want it but it may not be on your terms. Packer